Japan’s Nikkei 225 index jumped as much as 3 percent to trade at its highest levels since January 2008 and ends with a weekly gain of 7% as a rally in resources led Australian stocks to close at fresh five-year highs.
The yen weakened through the key 100-mark against the U.S. dollar for the first time in four years.
Analysts said the rally in dollar-yen was partly fueled by Thursday’s strong weekly U.S. jobless claims data and renewed concerns of the Federal Reserve scaling back its bond-buying program.
“True, profits are more tightly linked to spending and output than to employment, but the slow but steady improvement in labor market conditions suggests that the slowdown that is evident in other data is, in fact, a soft patch and not a sudden stop,” said Michael Gavin, head of emerging markets strategy at Barclays Capital in a report.
Clay Carter, Head of International Equities at Perennial Investment Partners explains why he believes the Japanese currency will overshoot in the near-to-medium term.
Robust earnings news added to the index’s upward momentum with camera maker Nikon surging 14 percent after forecasting a better-than-expected operating profit and internet security software provider Trend Micro rising 17 percent after reporting a rise in first-quarter profit to nearly $48 million.
Positive sentiment was further heightened after capital flows data revealed that Japanese investors were net buyers of foreign bonds for the first time since the Bank of Japan unveiled a radical monetary easing program in April.
“We only have two weeks of data showing outflows from Japan and the numbers involved are small, but they do suggest that this could be the beginning of an outflow of funds from the supertanker that is the Japanese life insurance and pension funds,” said Ray Attrill, co-head of foreign exchange strategy at National Australia Bank.